State-run oil firms will cut petrol prices by Rs. 0.78 (1.5 cents) a litre, or approximately 1.2 percent, from Thursday, Indian Oil Corp. (IOC) said. This will be the second cut this month, reflecting global prices and potentially easing near double-digit inflation.
A reduction in international petrol prices and a declining rupee led to the downward revision in petrol prices by Rs. 0.65 a litre, excluding state levies, from Dec. 1, said IOC, the country's biggest fuel retailer.
(The) current trend is of increasing international gasoline prices and further deterioration of exchange rate, the IOC statement said, indicating if this continues there could be an increase in petrol prices from Dec 16.
On Wednesday, spot Singapore petrol prices on FOB basis rose to about $110 a barrel while the Indian rupee declined 0.35 percent.
The companies had cut petrol prices by about 3.2 percent earlier this month, the first reduction in retail prices in nearly three years and the first since prices were decontrolled in June 2010.
Petrol prices have come down significantly from about $116/ barrel in the first half of this month to about $109/barrel and the exchange rate has deteriorated from Rs. 49.32 to a dollar to Rs. 51.51, the statement added.
India's three state fuel retailers - IOC, Hindustan Petroleum Corp. and Bharat Petroleum Corp. - discuss prices every two weeks and tend to move their prices in tandem.
Petrol has a 1.09 percent weighting in the inflation index. Near double-digit consumer prices have provoked criticism of the government, which subsidises other fuels such as diesel and cooking gas. Despite a cut in prices, petrol in India will cost more than in the United States or neighboring Pakistan and Bangladesh.
India's petrol consumption in the fiscal year ending March 31, 2012 is set to grow at 5 percent, its weakest pace in at least six years, as diesel prices are significantly lower and the gap has encouraged fuel switching.
Petrol is not as widely used as diesel in India - accounting for around 10 percent of fuel demand compared with about 40 percent for diesel - but it is high-profile because it powers many of the cars owned by the growing middle class.
In view of the lingering pessimistic economic perceptions and persistent high oil prices moving in a narrow range, the current trend of petrol consumption is expected to continue for the remaining months of the year, the Petroleum Planning and Analysis Cell said in a note posted on its Web site on Wednesday.
India's economy grew 6.9 percent in July-September, its slowest pace in more than two years and infrastructure output in October grew a marginal 0.1 percent, the slowest in more than six years.
IOC's statement said state-fuel retailers' daily revenue losses on subsided fuel sales rose Rs. 4.52 billion from Thursday, compared with Rs. 3.48 billion in the second half of this month.